Energy Outlook Q3 2012

Demand Erosion vs Security of Supply...

BY SEAN EVERS, MANAGING PARTNER, GULF INTELLIGENCE

September-01-2012

OPEC’s 12 member oil exporting countries earned about $1 trillion dollars in 2011. They are set to earn more in 2012 even though their biggest customers, the U.S. and China, are continuing to experience an uncertain economic outlook.

The world returns to work after the summer lull, that wasn’t such a walk in the park for the markets, with the tug-of-war between uncertain energy demand and security-of-supply still battling it out for the Alpha male spot. We packed our swim suits and sun screen in June with energy demand weakness flexing its muscles as security-of-supply ran for the beaches and oil prices appeared to be in free-fall, losing almost a third of their value in a matter of weeks as inventories bulged and geo-political risks were washing away with the tides.While the special women in our lives devoured “50 Shades of Grey” on lazy summer afternoons all over the world, the markets went on a rampage beating up Bears on all sides.Equities and commodities left the second quarter collapse in their wake and quietly surfed through different record levels as the drum beats of war rhetoric were once again floating across the Middle East, catapulting crude way back up past $100 with few paying attention as the bulls went a knocking once again on the door of $120.This tug-of-war has OPEC concerned, and it should. For the speed at which oil prices can drop like a rock when geo-politics fade to the sidelines would signal that a China growing at 7% demands fewer tankers to call at its ports than one leaping forward at 10%.